Question

Pfizer is developing a vaccine for a novel coronavirus. Since this is a new vaccine, Pfizer only has a very rough estimate of its probability of success. The cost of development and testing is expected to be $38 million. the revenue (if the vaccine succeeds) is expected to be $100 million.

What is the minimum probability of success needed for Pfizer to undertake this vaccine project? write down your answer in percentage. for instance, if your answer is 20%, write down 20.

Answer 1

To calculate the minimum probability of success needed for Pfizer to undertake this vaccine project, we can set up an equation using expected costs and expected revenue. The minimum probability of success needed for Pfizer is 27.54%.

Step-by-step explanation:

To calculate the minimum probability of success needed for Pfizer to undertake this vaccine project, we can set up an equation using expected costs and expected revenue. Let P represent the probability of success:

Revenue = P * $100 million

Cost = (1 - P) * $38 million

For Pfizer to break even, the revenue must be equal to the cost:

P * $100 million = (1 - P) * $38 million

Simplifying this equation will give us the minimum probability of success:

P * $100 million = $38 million - $38 million * P

Solving for P:

$100 million * P = $38 million - $38 million * P

$100 million * P + $38 million * P = $38 million

$138 million * P = $38 million

P = $38 million / $138 million

P = 0.2754

So, the minimum probability of success needed for Pfizer to undertake this vaccine project is 27.54%.